Google Is Headed to $1,000: Analyst

James Lee, CLSA analyst explains how the tech giant's cost per click improvement will help drive the company's stock price higher.

Google's expected roll-out of a new advertising-management system this summer will increase value for shareholders, said James Lee, analyst at CLSA, which raised its price target on Google to $1000.

The increased target marks a 20 percent premium on the current stock price.

According to Lee, the new advertising system, which is called "Advanced Campaigns," will change how customers buy keyword advertising from Google, allowing them to target search by device, location and even time of day.

"The new campaign simplifies how you buy ads from Google, compared to the current system which has hundreds, if not thousands, of variables you need to buy. The new system will be simplified for small and medium-sized businesses," Lee said. "We feel this will add more advertisers bidding on keywords, and the cost-per-click goes up as a result."

"We feel that mobile advertising for Google at this point in time is mostly participated in by large advertisers who can hire big search agencies," he added. "Relevancy is going to be much higher in the new system, and that's why we think that pricing is going to go up."

He said that this new system is a way for Google to close the gap between pricing on ads for tablets, smartphones and desktop computers.

Lee expects the roll-out of the new system, which is currently in beta, to occur at the end of June or beginning of July, since ad buyers need time to transfer and optimize information between old and new systems.

However, not long ago street analysts were putting up price targets in excess of $1000 for Apple, which is now below $450, more than 35 percent off highs. Although Lee admits that he's "always worried" as an analyst, he doesn't think Google will suffer the same fate.

"Given its market position, the investment they've made in Android, in their Chrome browser to manage their distribution costs, they are in a very good position in the multi-screen world where they can track users," Lee said. "One thing that's different from Google to Apple is that (Google's) core business is advertising — recurring revenues. That's very difficult to replicate. From that perspective we're very comfortable about Google's valuation."

Earlier on "Squawk on the Street" Jim Cramer called the $1,000 price target a "Sports Illustrated jinx," and said that "it mocks the tape right now to come with a $1,000 price target. I don't like it. There's an idea that whatever Google does is hot right now."